https://ift.tt/tqd5BOS
TPG Telecom has agreed to sell its fibre network infrastructure assets and its enterprise, government and wholesale (EGW) fixed business for an enterprise value of roughly $5.3 billion.
The deal includes Vision Network and sees TPG retain its mobile radio network infrastructure, consumer and EGW mobile business and its consumer and small office/home office fixed retail business, including fixed wireless, according to an announcement published on the Australian Securities Exchange (ASX).
Additionally, approximately 560 TPG staff will transition over to Vocus.
However, Vocus will provide fixed network services back to TPG as part of the transaction terms under a transmission and wholesale fibre access agreement for a fee of $130 million per annum over an initial 15-year term with two 10-year extensions at TPG’s election.
The value of the deal includes a potential $250 million contingent value payment, which is subject to targets for the Vision Network wholesale residential fixed access business between two and four years after completion.
TPG expects the deal to complete in the second half of 2025 and will deliver net cash proceeds of approximately $4.7 billion to $4.8 billion, with plans to use the funds for as-of-yet undetermined capital management and business investment initiatives.
Before the completion of the sale, TPG will complete an internal restructure, subject to Foreign Investment Review Board approval, and will then transfer all related assets into a wholly owned subsidiary which will be sold to Vocus.
Other regulatory approvals TPG needs to gain before the sale can be completed include those from the Australian Competition and Consumer Commission (ACCC), the Committee on Foreign Investment in the United States and the US Federal Communications Commission.
During initial discussions around the sale, which was first announced in August 2023, the price was pegged at approximately $6.3 billion.
“The transaction reflects a smaller asset perimeter compared with the original discussions with Vocus in 2023, resulting in a simpler operating model than was envisaged in the original discussions,” TPG Telecom CEO Iñaki Berroeta said.
“The deal unlocks the value of our fixed infrastructure assets while strengthening our financial position and creating a more focused and streamlined business with significant optionality for the optimisation of our capital structure.”
Berroeta also claimed that the sale will “create a challenger of scale in the enterprise connectivity sector with strength in international, inter-capital, regional and metropolitan connectivity” and extend Vocus’ connectivity and collaboration offerings to TPG’s EGW fixed customers.
The resulting financial impact of the sale to TPG is estimated to be, on a proforma basis, a $429 million decrease in earnings before interest, tax, depreciation and amortisation (EBITDA), a $334 million decrease in operating free cash flow, a $232 million decrease in depreciation and amortisation expense and a $198 million decrease in earnings before interest and tax.
However, this is not expected to affect TPG’s FY24 EBITDA guidance of roughly $2 billion to $2.03 billion excluding material one-offs, including the costs as a result from the sale, and cash capital expenditure.